Pershing buys Borders shares, stock soars

NEW YORK (Reuters) - Activist investor William Ackman, who heads Pershing Square Capital Management, said on Thursday the fund has bought more than 11 percent of book retailer Borders Group Inc.'s (BGP.N: Quote, Profile, Research, Stock Buzz) shares.

Borders stock rose nearly 12 percent in early trading.

The shares could be worth more than $36 apiece, more than 50 percent above their current value, over the next 18 months, Ackman said.

"The stock is cheap in our opinion," Ackman told investors at a New York conference. He also noted that the company's share repurchases have been "aggressive."

Ackman, who also owns shares of Borders' larger rival, Barnes & Noble Inc. (BKS.N: Quote, Profile, Research, Stock Buzz), said there are rumors of leveraged buyouts of both booksellers -- "for good reason."

A spokeswoman for Borders said the company does not comment on rumors. Of Ackman's purchase of Borders shares, she said: "It's a validation that our company's strategies are the right ones in place over the long term to drive value for our shareholders and it's underscoring confidence in our new CEO George Jones and his capabilities."

Pershing has pushed for sweeping changes at several companies, including Wendy's International Inc. (WEN.N: Quote, Profile, Research, Stock Buzz) and McDonald's Corp. (MCD.N: Quote, Profile, Research, Stock Buzz), and Ackman has built a reputation as an activist shareholder. He succeeded in getting McDonald's and others to adopt some of his recommendations.

He is currently leading a group of shareholders seeking to block Sears Holdings Corp.'s (SHLD.O: Quote, Profile, Research, Stock Buzz) takeover of Sears Canada Ltd. (SCC.TO: Quote, Profile, Research, Stock Buzz), saying that the offer is too low.

Ackman said that shares of Borders shares are cheap relative to the company's growth prospects and cash flow.